Unlicensed Contractors

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I'm sure this has been broached before but I need some suggestions. I'm a remodeling contractor in San Diego lisenced, bonded, insured since 1985. I build my own cabinets for my remodels and have used this site many times for great advise.
The story... I have a long time client that I consider well off. I've done at least $250K in remodel work over the last 20 yrs for them. They've always been the best people to work for. Several years ago I bid a bathroom remodel for them $23K that was a no go at the time. They just emailed me and said we are interested in starting that bath remodel (I'm like Yeah) but then they drop the bomb...We got a bid from a contractor that did work for some good friends of ours and he comes highly recommended and his bid is $15K ...can you meet or beat his price. They attach his estimate. First clue that we are not comparing apples to apples is that he has misspelled half the words on his contract. So I look him up on the State License Board and there's no Jose Construction (not real name but you get the picture) Now I don't mind competition but give me a break! We have a meeting in a week.
What I want to say to them... I'm not dropping my price, and further more if you hire him I'm going to turn him into the CSLB" . What I will probably say ... " I won't even consider his bid in our negotiation cause he's not licensed, but if you get another bid from a licensed contractor I'd be happy to talk turkey".
I'd also like to say something to them in regards to how unethical it is for them to consider hiring a person that has broken the law to get here, and continues to break the law undermining every legitimate contractors that plays by the rules. But I also don't want to offend them. I don't know about you guys but in the last 7 years this has become a real thorn in my side. We as professional contractors have very little protection and recourse from these bottom feeders. Its time to stand up and start letting people know how its damaging our industry , how it has an effect on society. I'm interested to read how some of you would address this issue. Thanks!

I wouldn't turn him in, I would suggest that if price is all they want then use the unlicensed guy and they can get the work or at least the install for free (unlicensed contractors can't perfect liens or sue for non payment).

They would probably be required to disclose that they had unlicensed work done when they sell.

"(a) Except as provided in subdivision (e), no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract, regardless of the merits of the cause of action brought by the person, except that this prohibition shall not apply to contractors who are each individually licensed under this chapter but who fail to comply with Section 7029.

I would also point out if there is ever a fire or damage and the work is by an unlicensed contractor they may not be covered by their insurance policy.

If an "employee" gets hurt on the job and there is no WC they are responsible for the injuries and their homeowners policy most likely won't cover any of those expenses of a 10k table saw cut is going to be their responsibility out of pocket, and if the guy can't work for the rest of his life, well they just played legal lotto and for 8k lost everything (well they won the lotto which is the right to pay the other guy).

Ask them if they would bet 1 million or 5 million (potential risk) to win $8,000 (net savings), because that's what they are doing, they are potentially betting everything they have to save 8k.

What Are the Risks of Hiring an Unlicensed Contractor?

While an unlicensed contractor may provide you with a low price, there are many risks involved in dealing with one:
•Unlicensed contractors cannot get permits, so their work is not inspected and may not be up to local code.
•If an unlicensed contractor improperly installs an appliance, such as a water heater that explodes, your insurance will not cover it.
•If an unlicensed contractor installs an appliance, such as a water heater, dishwasher, and so on, the product warranty may be voided.
- See more at: http://www.legalmatch.com/law-library/article/unlicensed-contractors.html#sthash.PSdw52K1.dpuf

Thank you very much for you consideration, however due to the due diligence needed as a bonded and licensed Contractor I must decline this offer, I am sure the contractor you have considered "Knows the Value of his work"

xoxoxo !

I got one who has dragged a 90 day job into oblivion at a discounted rate by being about as proactive as an draftee on mess duty. with 3-3.5 weeks to go on 12 elevations without any approvals or money and xmas around the corner and LOTS of work.. somehow he has mistook me for the contractor you are referring to !!

Randy,
I also run a shop in San Diego. We do have a somewhat unique situation given our proximity to Mexico. There are many, many shops that operate here in San Diego using guys who live in TJ and work here getting paid under the table. You see it primarily in residential cabinets, but I've also seen some commercial.

You can fight it if you wish, but you'll be swimming upstream. From a practical standpoint, I've found it's better to focus on working for GC's and customers who value legit work done by legit shops with insurance. There's still plenty of good work out there. No reason to lose too much sleep over the bottom feeders.

Brandon, your situation is not unique. Shops fight against one man shops in a garage all over. Any city in the USA has illegals working under the table. Part of doing business. It's tough to say, but when you have a customer shopping the low price deal and trying to squeeze you, they might have been a long time customer but were not that happy. Time to cut ties.

You really need to check your licensed contractor privilege. You should thank him for stealing money illegally from your family. In fact you should appeal the legislature to raise your taxes so you can supplement his unlawful income with handouts.

rich,
It is undeniably unique having TJ next to San Diego. There is no other major city comparable in size and wealth in the US where you can live in Mexico and work in the US. Sure, you have bottom feeders all over the place. The difference in the rest of the country is that those bottom feeders have to live at the US cost of living, not Mexico's.

It's also different from 1 man garage shops elsewhere in the country in that you can have 5 or 10 guys from baja in a shop here. So they may be bottom feeders, but they can do much larger jobs than garage shops can do.

Thanks all for your comments. And to Crazy Talk...you made me laugh and thats a good thing these days... Hey just cause Nancy Pelosi is from California doesn't mean the whole place is bad...but then on second thought maybe it is. Haha but we have great weather! I'll drop a post to this thread to let you all know how it works out.

"I will match his price if I get to match his level of quality, service and integrity."

Don't ever show your underbelly in business unless the person you are dealing with you have decade plus long strong relationship with and they are of impeccable character- even then do so at your own risk. Even when times are slow, it's a look at your phone's calendar and making a strained face and a, "umm, I think I can fit you in during that time..." By matching a price, especially dropping that big of a percentage, you are completely and utterly at their mercy because they know you are desperate. Even decent folks smell blood in the water. Let's face it, few things are as important to people as money- and they've already told you their's is more important to them than you. You are about to be taken out to the woodshed. Stand strong and firm, but be courteous.

I feel your pain. Part of the charm of the Woodweb is that it allows the perspective of others to weigh in on those business episodes where one is perhaps too close to the issue at hand.

There is some good advice here, especially from Alan, who consistently offers excellent business advice.

The Buckley quote is apt, but may be so subtle that the nuance is lost on the client. You get to feel good saying it, while your client wonders what the hell you are talking about.

As my pseudonym indicates, this has happened to me as well. To that end, I offer the following for your consideration:

1.) Have you done any work for these clients in the several years since the original bathroom quote? That itself may say a lot.
2.) Did you update your original quote to reflect current labor and materials?
3.) Have these clients actually seen the work of the other contractor, or are these just two friends talking trash?
4.) I’m not from California, but is it possible that the general contractor has someone else with a license pull the permits, a sub-contractor perhaps. This happens often where I live.
5.) Lack of a spell checker is not an indicator of contracting workmanship quality. (You misspelled license in your posting, and I may have misspelled something in mine.)
6.) Perhaps these clients are not as well off as you think, given that they are seeking and considering a lower bid over a continuing business relationship.
7.) As with any client, something will eventually happen that terminates the relationship. Maybe they are reflecting on how much they might have saved if they had had the other contractor do the quarter-million dollars worth of remodeling that you have done for them. I don’t mean this to be insulting or to reflect on the quality or pricing fairness of your work; it’s just how some people think.
8.) If this is a continuing thorn in your side, as you say, you may have to point out the difference to clients who either do not know, or do not care, about the licensing of their contractors. This can get nasty, and can do more harm than good.
9.) If someone is willing to do the work for two-thirds of your quote, perhaps you should let them, and spend time seeking better work with a better return.

My point is that maybe the owner can help us all out by getting the job for free.

How can they get around it, they can owner contract and hire labor and withhold taxes and pay WC or hire LICENSED SUBS.

They can buy the cabinets and pay a licensed sub to install, you don't need a contractors license to make cabinets, just to install them.

Randy can
A) turn them in although that takes forever even when you have a valid grievance

B) let them know the reason the cost is lower and the risk they are taking to save that money and let them do the cost benefit. It really could cost them so much more down the road or if there is an accident.

I have been at this a long time.
Clients get all kinds of prices and then in there heads they want the higher priced more competent guys workmanship and the bottom feeders price. Be very polite and say no thank you and then charge them up the backside to clean up the other guys mess. He will make a mess and you will get the call.

We've all been down this road. You might want to help the client understand your position by copying Alan's post and giving it to them and say, thank you and be gone before they read it.
Things I won't do: cut my price w/o the client giving up something to get the price down. Go in after a hack has made a mess out of something that I bid. I have to explain to them that no matter what I would try to do to "fix" it, it still won't be good and would then reflect on me.

Lucky for you, California has lots of lawyers to bring justice for all. And a great set of politicians that make names for themselves all over the country.

I usually won't admit it, but I was born in LA and lived in the Bay area for awhile.

I am here at the northern most part of southern california( ventura county) and undocumented/unlicenced labor is a huge problem, for us who are licenced anyway. The mentality of the consumer out here is I want it, I want it yesterday and I want a great deal. This is pretty universal in my experience. Here is an example. There is a 15 man shop full of illegals not but 20min from me that is kicking ass. They are illegally zoned working out of a sorage building in a residential area. they have practically no overhead and enough man power to tackle some pretty big jobs in short time. Their quality is what I would call good enough for most consumers. only you, me, or maybe a high end consumer would notice the difference in quality. Local california law will do nothing about this. they basically dont want to deal with the mess so they ignore it. So I ask those of you who poopoo this topic what they might now suggest should be done.

The Rich folk out here love to hire illegals almost as if it is a charitable cause on their behalf. This probably happens less in the commercial market but in residential home improvement this is rampant. I have a friend who does tile setting who was just underbid by half by someone totally unlicenced ect... But the consumer is like " its just tile, how bad could it be, we should just save the money"...

It has helped me in the past to use PR when dealing with customers. Which is probably obvious when you read my posts.

People buy for emotional reasons, it helps if you can utilize what those reasons are. Generally if they feel that your product will help them with their image with their friends or colleagues your product/service has more value to them. This is the same reason they have a Mercedes, Porsche, BMW. This is the same idea as sell the sizzle. Another way to look at this is that they are hungry for acknowledgment of their success. Salesman for high end cars are generally hep to this and would never think of using a high pressure approach.

The other emotional reasoning I have seen come into play on this is the question of trust.

The first rule of PR is to "fill the vacuum". The other bid put a vacuum of information into the customers head. So your job is to fill that vacuum with facts showing that you deliver on time, longevity, licenses, insurance, bonding, years of experience, the sequence of events that a job goes through when it is goes through your shop, what organizational policy you have in place to ensure that quality and service are maintained, etc.

Another thing that has helped me is to do a monthly mailer to former customers. Usually a postcard or a newsletter anything as long as they know it came from you. Years ago the owner of a clothing store chain came in to the office and said " Pat I have to do business with your advertising is better than Levis." The only thing that I did was the monthly mailer.

In a nutshell you are trying to create a desire for your service. (PR = pro (pro = for) motion)That is done with PR and advertising to your existing customers.

The problem is huge here in S. Cali. I saw it coming down the road long ago and stopped hiring them. Plenty of good labor from Hire a Patriot.Com. Lots of marines separating from the service looking for any kind of work. When the recession hit all the illegals that worked for contractors were suddenly out of work and the bi-lingual ones were able to scoop up all the low end work. Now they are moving into my realm. But soon a new batch will cross the border looking for jobs and they will eventually displace their fellow expatriates. I always laugh when I here the ones that made it here say we should have open borders, cause by then I'll be retired and it will be their ass getting under bid.

I'm not sure that is the complete explanation. A friend of mine has a shop in Az, I would think the problem is the same there. (But it may be worse here because immigrants are much more subsidized in Calf.) He said that the pricing in Calif is much more competitive than in Az.

Another factor that often get overlooked on this is demographics. Calif is getting old especially Orange County and LA County. When people get old they quit buying. And right now we are in a dip as far as people at the home buying age.

I have always heard that the North East is less competitive. My theory is that this is because of demographics. 60% of the population in the United States is with 600 miles of Tennessee, that makes for more demand in that area.

The other thing I look at is whether the economy in the state is growing or shrinking. It appears to me that other than the San Jose area it is shrinking. Much of the movie industry has been off-shored as has much of the aerospace industry. Manufacturing has been driven out for a long time now.

You are right about that Pat. we are basically a giant unloading dock for the rest of the country. Most of the real industry has left or is leaving with the exception of gas and oil which is pretty big industry around here. CNC giant Haas automation has been located here in oxnard for ages and now I hear that they are looking to make texas their home. Boeing still has some action down in longbeach but not what it used to be. However theres still lots of work going on out here... And in a price driven market who do you think is going to get it

With fracking slowing down because of the price of oil it is not an issue right now. But it WILL be coming to Calif in the future. Because the whores in Sacramento salivate at the potential to spend more money.

I find it funny that even with environmentalists forcing the diverting of water to the Sacramento River to save the smelt. (which was a failure BTW) But when it comes to money, money trumps everything else and I guarantee that fracking will come to Calif.

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